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Strategic Management
CEM 503
Proposed Discussion Questions
Teacher note: Generally these questions are used to
a) help the students in their preparation, to understand the teaching focus of the session;
b) to help identify the key issues to discuss in class to dig into the learning for the session; and
c) as a guide to help the instructor allocate time for the class discussion.
Class / Topic / Case:
Class 1
Introduction
Class 2
The Industry Value System
1. How are firms organized individually to deliver projects?
2. How are firms collectively arranged in a system to add value in delivering projects?
3. Which way does the product flow? The money? The information?
4. Where are the efficiencies and inefficiencies in the system?
5. Where are the opportunities to make money? To increase efficiencies?
Class 3
Risk, Reward, and Capability:
Poland’s A2 Motorway
1. What is the arrangement of the value system in this circumstance?
2. What are the major risks? How are they described? How well are they understood?
3. Who do you think stands to reap the most reward? Who takes the most risk?
4. Follow the money. What is the basic cash flow if the project is successful? How could this
go wrong?
5. Could you define "success" for the whole project including all organizations involved?
6. As leader of one of the organizations, how would you go about planning to be the
Owner? The Engineer? The General Contractor?
Class 4
Market Segmentation
Dell Webb
While this case is largely about Boardroom dynamics, we will spend more time on looking at market
segmentation opportunities for the firm.
1. What would you do if Phil Dion also quit the Del Webb company, and you were now the
CEO?
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2. Prepare a market segmentation matrix using the concepts in Chapter 7 of the
reading. Consider your choices in how to set it up.
3. Using the Five Forces model, discuss how some of these segments might or might not be
attractive for Del Webb from a strategic point of view.
4. Then select up to four different segments and describe how the Generic Strategies discussed
in Chapter 2 might apply to competing in these segments.
5. All of the diagrams for this problem set may be hand drawn. I am looking for thinking, not
for computer formatting skills.
6. You might also think of other clever ways to efficiently convey the information by
combining or modifying some of the tools.
Class 5
Segment Attractiveness
Generic Strategies
Dell Webb (continued)
(continue with same discussion questions from previous class)
Class 6
Cost Advantage
Arborite
Arborite is a supplier to contractors. They have a complex firm value chain and many problems in
their business. This is the kind of situation that you might be asked to analyze or even to manage!
Assume that you work in Arborite's financial department. Brian Nutter has asked you to provide
some diagrams to help illustrate the issues as the firm enters strategy and budget discussions.
1. Do the sales goals generally make sense in light of history and total market size?
2. Where does Arborite fit in the industry value chain?
3. Prepare a market segmentation matrix for Arborite. Which segments do you feel are
attractive, and why?
4. How does Arborite compete: What generic strategies is Arborite pursuing NOW in each
segment?
5. What strategies are their competitors pursuing?
6. What strategies do you feel Arborite should be pursuing? Why?
7. Prepare diagrams of Arborite's "Firm Value Chain" at present, and then as you propose it
should be. On what value activities would you concentrate in the future? Why?
8. What would be your choices for future markets? Why?
9. What would you do about plant capacity?
10. Are there other opportunities that may not be evident in the case?
11. What would you recommend they do?
Class 7
Differentiation
KONE: The Monospace Launch
You work at KONE supporting Raimo Hatala. The firm has asked you to provide some diagrams to
help illustrate the issues as the firm enters strategy and budget discussions.
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1. Where does KONE fit in the industry value system? How are elevators sold?
2. How does KONE compete: What generic strategies is KONE pursuing NOW in each
segment?
3. What strategies are their competitors pursuing?
4. Do the sales goals generally make sense in light of history and total market size?
5. Prepare a market segmentation matrix for KONE. Which segments do you feel are
attractive, and why?
6. What strategies do you feel KONE should be pursuing? Why?
7. Prepare diagrams of KONE's "Firm Value Chain" at present, and then as you propose it
should be. On what value activities would you concentrate in the future? Why?
8. In what ways does KONE believe Monospace to be differentiated? Is this realistic?
9. How do they signal differentiation?
10. How much will the customers value differentiation, if at all?
11. How would you manage the rollout in Germany? Why?
12. What are the firm value chain drivers of a differentiation strategy, in this situation? Should
the emphasis be different in the future than presently?
13. What would you recommend they do?
Class 8
Vertical Integration
Savannah West
This is a finance case which we will use to discuss vertical integration in the A/E/C value
system. Think of this case from Willy Welsh's perspective.
You have been hired as Willy Welsh's Chief Operating Officer. Write your analysis of the
strategies that Engineered Concepts should follow going forward. What are your major three or
four recommendations and why?
Select and use the tools introduced in the course to make your argument. Also consider the new
issues in vertical integration raised by the case and by the reading.
Based on what you can infer from the case, think of the analysis in terms of how you might help this
company grow beyond the one project in Savannah.
1. 20 years later, what is different and what is the same in our industry? What role(s) does
Engineered Concepts play in the overall value system?
2. What do you think the firm value chain looks like in Engineered Concepts?
3. What are the major elements of risk in the Savannah West deal?
4. Who takes what risks? Who gets what benefits? How could the risks be contained and the
rewards be allocated?
5. What advantages and disadvantages does Welsh realize from being vertically integrated?
6. How sound is his personal financial statement?
7. If you were Allison Porter, would you make the loan?
8. If you were Willy Welsh's Chief Operating Officer, how would you proceed in helping the
company to grow and compete?
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9. What are some of the ways in which Willy Welsh could analyze the market segments in
which he currently competes, or which he could consider entering?
10. How has Welsh addressed the issues in vertical integration?
11. What are the pitfalls of vertical integration? The benefits?
12. How does Welsh follow or not follow the principles of strategy in fragmented industries?
13. Do you think there are ways to overcome fragmentation?
14. How might e-commerce and Internet technologies alter the ways in which Welch competes?
Class 9
Strategy in Fragmented Industries
George B. H. Macomber Co.
1. What roles does Macomber play in the industry value system?
2. How would you characterize their firm value chain?
3. Is this consistent with the market segments and strategies which they seem to be pursuing?
4. How does their service offering help Owners to manage construction risk, in the context of
the HBR article?
5. How are they choosing to compete in this fragmented industry?
6. Do they have a chance to overcome fragmentation, are they coping with fragmentation, or
are they not addressing the issues?
7. How do you feel about their dedication to technology? Will their investment be repaid?
8. How would you set up the Firm Value Chain to help John Macomber budget his resources
including money and his management time?
Class 10
The Firm Value Chain
Wood Structures, Inc.
Paper # 2 Due (5 Pages Maximum, at Start of Class)
You are applying for the job as CEO of Wood Structures, Inc.
Bill Alcorn has asked you for an analysis of the strategies that you would follow, and how you would
implement them.
Some of your MIT instructors are on the Board of Directors and they are interested to see how you
use the tools of the Strategic Management course.
Prepare a 5 page (maximum!) paper using the steps in planning, models, an concepts of the course to
describe what you would do, how you would do it, and what you expect to be the results.
1. This is an old case. What might be different today, and what is the same?
2. What position(s) does Wood Structures, Inc. fill in the construction value system presently?
3. Where and how do they compete?
4. How might the new competitor compete? How should the new competitor be addressed, if
at all?
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5. Are there other ideas beyond existing models that Wood Structures might be able to pursue
to advantage in 2002? What, why, and how?
6. Could you see yourself thrust into a situation like this?
Class 11
How Information Gives You
Competitive Advantage
Otisline
1. What is/are Otis' place(s) in the industry value system?
2. What does Otis' segmentation matrix look like?
3. Where does Otis make money?
4. What did the Five Forces look like before Otisline? What do you think they look like after
Otisline?
5. Was the elevator service business fragmented before Otisline? Is it fragmented now?
6. How much of this change is due to regular corporate strategy decisions and how much
depends on innovative use of information technology?
7. Do you see other opportunities to use these kinds of strategies in real estate, architecture, and
construction?
8. Is "Industry Transformation" possible in our industry? What or who might drive it?
9. How do you think the advent of Otisline impacts the employees?
Class 12
Knowing A Winning Business Idea
eBricks.com
Paper # 1 - 3-5 Pages - Hand in at start of class
E-Bricks was one of the darlings of the dot.com boom, and it was in the construction space. Since the
time of the case the company raised more money and eventually became part of Citadon, Inc.
This case is a chance to look at the historical phenomenon of dot.coms raising equity money; and to
learn from their good and bad decisions.
This paper will be difficult to write given that there are so many concepts to cover. This effort will,
however, provide a strong foundation going forward.
1. Using the basic tools of strategy, describe in words or pictures where e-Bricks fits in the
industry value system, what market segments they address, and what is their basic strategy.
2. Using the concept of "Knowing a Winning Business Idea" and the examples of Savannah
West, how well does E-Bricks fit the criteria to be a winning idea?
3. What do you think will be the major hurdles to overcome?
Class 13
Marketplaces, Disintermediation
Quicken Insurance
Comment: This case discussion serves several purposes. First, it's an example of a contemporary ebusiness initiative. Second, we will use the case to illustrate the major points in studying competitive
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advantage. Third, it's possible that financial services may be a more compelling e-business for real
estate and construction than are design, collaboration, or procurement. Finally, the problem set is
intended to cause you to put your thoughts on paper in reviewing this business; and the problem set
will give me feedback on how well people understand the concepts to date.
1. What business are they in?
2. How do the five forces interact?
3. What is their generic competitive strategy?
4. How do you think that this retail insurance concept might be expanded into the business to
business realm?
5. This is an example of a company that has made a success of helping consumers to buy a
certain product. How does their approach compare to that of E-Bricks? How could it work
in the real estate and construction industry?
6. What role(s) to Quicken, and QuickenInsurance, play in the value system for insurance
products?
7. How would you segment the market that QuickenInsurance is thinking of taking on?
8. How could this business model work in the real estate and construction industry?
9. Did the role of information provider work out as planned or has QuickenInsurance had to take
on more risks, at the time of the case?
10. What is the strategy for building brand awareness?
11. How do the Five Forces determining industry attractiveness change over time in this model?
12. How is QuickenInsurance managing in the marketspace, as laid out by Rayport and Sviokla?
Class 14
Auctions, Consulting, and Services
Freemarkets Online
Comment: Many e-business models are based on some aspect of procurement. There are some
successes, like Dell and Cisco; and some failures. This case illustrates many of the benefits - and
costs - that go with online auctions.
1. What do you believe are the value activities that FreeMarkets provides?
2. Are there certain kinds of goods and services that are most (or least) suitable for an on-line
auction?
3. Do you think the industry structure we have discussed is suitable for on-line auctions? In what
manners?
4. What do you think is the impact on collaboration and cooperation when the procurement
process is conducted this way?
5. What kinds of firms in the real estate and construction industries have the size and standing to
take advantage of these technologies?
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Class 15
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Supply Chain Management
WorldCo. Ltd.
This class introduces the first of several technologies and ideas which have been proven in many other
industries and which have the potential to transform the real estate, construction, and design industries
as well.
The case is based on retail garment sales in Japan, with one of the leading clothing manufacturers in
the world. Many of the issues don’t apply to construction at all. However, some of the coordination
and optimization ideas could apply quite well – if one could imagine an entity with a role like that of
World Co.
Supply chain optimization has immense potential to help drive efficiencies, margins, and competitive
advantage in real estate and construction. What kinds of business entities and what kinds of strategies
would be necessary to make use of these kinds of tools?
1. How does the system help World make money?
2. How does the system help others in the World supply chain make money?
3. What efficiencies does the system promote, or what risks does it reduce?
4. What kinds of business relationships are necessary for this to work?
5. What are the similarities and differences in the retail clothing supply chain and the
construction supply chain?
6. Does your answer change if you consider the retail supply chain before there was significant
information technology?
7. If you consider how the construction supply chain might look ten years from now?
Class 16
3D Modeling
BMW AG: Digital Car Project
3D Modeling is the reality in most product companies. At the time of the case, the business decision
at BMW revolved around other business issues – culture, employee skills, and vendor relationships.
1. It’s possible that 3D modeling, particularly if tied to databases like those used by World Co.
Ltd., could transform the industry. Given this Porter reading, how would this happen?
2. Considering the Bower and Christensen reading, is this a sustaining or a disruptive
technology? Who can implement it?
3. 3D Modeling largely exists for work acquisition and as a design aid in the construction
industry. Presumably there are material benefits available from using these tools with more
strategic application. Why doesn’t this happen? How could it happen?
4. BMW is a manufacturing company as well as a design company. Design decisions impact not
only the aesthetics but also the ease of manufacture. Why and how are these kinds of
considerations accommodated (or not) in AEC?
5. How do the ideas in Industry Transformation and Catching the Wave interact in AEC with
what’s happening in the Automotive business?
6. Firms like BMW are large construction buyers and large owners of manufacturing
facilities. How do you think they apply their knowledge of 3D from the manufacturing
world? How do you think that the delivery cycle of a building compares to the new model
delivery cycle for an automobile? Does this raise any issues for BMW as a construction user?
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Class 17
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Knowledge Management
Buckman Laboratories
1. What is knowledge management?
2. What is the basic strategic situation at Buckman Laboratories?
3. How does K'Netix help Buckman execute its strategy?
4. Why is knowledge management a potential source of competitive advantage for professional
service firms in general?
5. What parallels can you see in real estate, design, and construction firms?
6. How might a knowledge management system alter the presently fragmented structure of our
industry?
7. What other trends are in place or on the horizon whose strategic adoption is enhanced by
knowledge management?
8. How will this impact large firms? Small firms?
9. What are the benefits and pitfalls of implementing a knowledge management solution?
10. What do you think of the transition from a culture that rewards hoarding of knowledge to a
culture that rewards the sharing of knowledge?
Class 18
Knowledge Management:
International Scale
KM at Andersen Consulting
(Andersen Consulting was not included in the demise of Arthur Andersen & Co., having already been
spun off as Accenture).
Remembering what has been learned by a firm or by a group of people should be a source of
competitive advantage. Many of the technologies discussed to date in the course, as well as the vast
amounts of data that are captured in their use, should in concept be aggregated and used to provide
advantage. In industries like system integration (Andersen's forte), this clearly is true. Will it be true
in real estate and construction?
1. How has Andersen altered the five forces – notably for the supply of labor, and for the
negotiating power of buyers?
2. How did they segment their potential markets?
3. What are the key elements in a successful knowledge management strategy?
Class 19
Aligning Incentives 1;
Supply Chain/Revenue Chain
(Blockbuster)
This simple example illustrates a way in which firms which had been set up as adversaries were able
to re-think their relationship so that each could make more money. How did they do this?
1. How much of the gain did Blockbuster get and how much went to the studios?
2. What characteristics made sense in this environment for Blockbuster to turn its supply chain
into a revenue chain?
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3. How do you think this strategy might have had impact on the Five Forces for Blockbuster,
particularly with respect to differentiating (or changing the cost picture) compared to smaller
video rental competitors?
Class 20
Aligning Incentives 2:
Regency Plaza
This case is adapted from a real construction project in Boston. Note that the structure of the
customization of the dozens of condominiums amounts to a repeat-play game in classical game theory,
as most of the participants are repeated each time. Note that the current structure does not seem to
find an equilibrium with optimum value created for the system - and in fact costs money to almost
everyone.
The objective of this class is to use a real life real estate and construction example to illustrate ways in
which game can be proposed which helps everyone to act as if their interests are aligned.
Problem Set #2: Three Pages.
Assignment: Using the concept of creating value from Blockbuster, using the idea of aligning
incentives, and considering the game theory approaches outlined in The Right Game, prepare your
"condo customization pricing game" that would take the multi-play aspects of this real world problem
and put incentives or criteria on all of the parties that would provide each of them with short term
economic incentives to optimize the whole system in some way.
Class 21
Consortia and Federations
Colliers and the Technology
Solution
The Real Estate, Construction, and Design industries are very fragmented, and for many reasons they
are likely to remain so. Scarce resources that inhibit economies of scale include capital
requirements, project management requirements, and new work acquisition requirements.
It's possible that new technologies, or the expansion of knowlege gleaned from old technologies, may
respond better to a franchise or alliance model than to a large company model or to an every-man-forhimself model.
This case explores some of the benefits and drawbacks of a franchising / alliance model. While the
core technology, Lotus Notes, has progressed substantially in the ensuing years and is no longer
directly relevant, the concepts of how to use the power and the independence of the members still very
much apply.
Comment: Profitability in the real estate and construction industry may never improve as long as there
is severe fragmentation. Big companies are one way to eliminate fragmentation. In concept, consortia
are another way to realize the benefits of consolidation. Initial forays might have been motivated by
the "easy money" that seemed available up until early 2000. New initiatives will have to show more
business purpose. Is it possible to have success with a "federation of entrepreneurs?" How can you
motivate members with a short term orientation to share information that benefits the whole in the
long term?
1. How are the Colliers members bound together?
2. What’s the overall benefit of the system for members?
3. What are some of the practical reasons why it's hard to adopt?
4. What parallels would you draw to a development principal like EquityOffice? To a large
construction entity like Skanska?
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5. What business objectives would you pursue in establishing a consortium?
6. Would they be around standards that everyone can share, or around proprietary advantage?
7. Many of the concepts studied earlier in the E-Business segment have required large scale to be
useful. Large scale is difficult to accomplish for construction firms. Could consortia and
federations address these issues and help the industry to evolve?
Class 22
Summary and Wrap – Up
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